The global effects of Covid-19 are putting real pressure on the New Zealand supply chain, economist Cameron Bagrie told the road freight transport industry this week.
Covid-19 meant no industry conference this year, so the Road Transport Forum invited Cameron to give us one of his popular industry updates via Zoom.
There was good news and bad news, and Cameron is pretty good at looking at how you can turn the bad news into good news. But there is no escaping there is pain ahead as we watch parts of Europe and the UK shut down again for a second autumn/winter wave of Covid.
What Cameron told us is what we are hearing across the board, and we are trying to get Government to listen. If for example, there is a Covid-19 vaccine and New Zealand is able to secure some, the supply chain is not in place to get it here and distribute it.
While exports are still working for New Zealand, imports are going down and sourcing goods is becoming a problem.
Cameron says people are talking about demand when they should be talking about supply – Covid is not supply friendly and “the Reserve Bank can’t fix supply chains”.
New Zealand is a small market to service and so is never going to be at the top of the queue. And while we can do a lot for ourselves, we are reliant on all manner of goods coming into the country to let us do that. When securing essential items becomes impossible, what’s the plan?
Some urgent thinking needs to go into managing this growing and critical risk and looking at how New Zealand can boost capability locally and fast.
Unfortunately, this doesn’t apply to goods only. Migration numbers have gone from booming to collapse which creates another point of vulnerability for New Zealand. There have been years of underinvestment in key skills and capability because we could always import them from overseas, Cameron says. But to get the economy moving in areas such as infrastructure, or to manufacture locally what we can no longer source from off shore, we are woefully short of expertise.
In the spirit of never letting a good disaster go to waste, Covid-19 presents opportunities for some.
“Think small to stand tall,” Cameron says. While the macro-economy is beyond the control of individual businesses, focus with a ruthless obsession on all the little business levers. Get up every day and make a small improvement and over a couple of months, the dial will start to move in the right direction.
While human instinct may be to hunker down in bad economic times, the people being rewarded in the Covid world are those taking risks and there is a growing wedge between firms that are adaptive and those that are not.
Covid-19 is a bit of a lightning rod for rapid changes that were already occurring. People working from home, for example, was starting to happen but became the only option during lockdown. The changes that have come with that means distribution moving from city centres to suburban areas as people start to buy in the suburbs where they are working, rather than the central business district where their company may have been located.
There is also pressure in an economic downturn to cut prices but if items are in short supply, or can’t be sourced, no sensible business is going to do that. The reverse is more likely.
Cameron wants to see both the Government and businesses take more risks and embrace technology and change. He would prefer the Government out there spending on critical infrastructure and the Reserve Bank doing a lot less. He is critical of the Reserve Bank driving down interest rates and says all this will do is widen the gaps between the “haves” and the “have-nots” in our society by making housing affordability worse.
He had some strong advice for the RTF too and that was to keep making some noise on the government front as there is not enough representation for small and medium sized businesses.
“You are going to be getting into a bit of a dog fight, but it will be needed,” he said.
As we wait for the new Government to be formed, we are certainly gearing up to represent our essential part of the supply chain that is going to keep New Zealand moving in any kind of Covid-19 response and recovery.
We recorded Cameron Bagrie’s presentation and as this is just a snapshot, it is well worth viewing here.
– Nick Leggett, CEO, Road Transport Forum